GST Registration Cancellation Invalidated: Authorities Must Provide Clear Grounds and Opportunity for Hearing Before Retrospective Action

HC ruled that GST registration cancellation with retrospective effect was improper due to lack of specific details in the Show Cause Notice. The court set aside the order, directing tax authorities to issue a proper notice providing clear grounds for cancellation and ensuring the petitioner receives an opportunity to be heard before taking any retrospective action.

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Issues involved:
The judgment involves the cancellation of GST registration of the petitioner with retrospective effect, based on a Show Cause Notice alleging wrongful availment or utilization of input tax credit or refund of tax without providing specific details.

Details of the judgment:
The petitioner challenged an order dated 02.05.2023 and a Show Cause Notice dated 06.09.2022, which called upon the petitioner to show cause as to why the registration should not be cancelled for issuing invoices or bills without supply of goods and/or services, leading to wrongful availment or utilization of input tax credit or refund of tax.

The impugned order cancelled the registration of the petitioner with retrospective effect from the date of its registration on 27.06.2018. However, the Show Cause Notice lacked specific details or particulars regarding the alleged wrongful actions of the petitioner. It was noted that the Notice seemed to use a standard format without clarity on whether the petitioner had issued invoices without supply or led to wrongful availment of input tax credit.

The judgment highlighted that the Show Cause Notice and the impugned order did not provide reasoning or particulars for the cancellation of registration retrospectively. It was emphasized that cancellation with retrospective effect should be based on objective criteria, not merely due to non-filing of returns. The judgment stressed the importance of considering the consequences of denying input tax credit to customers when cancelling registration with retrospective effect.

The Court set aside the Show Cause Notice and the impugned order, allowing the respondent to take further action in accordance with the law, including cancellation of registration with retrospective effect, provided a proper Show Cause Notice and an opportunity of hearing are given to the petitioner. The respondents were also permitted to take steps for recovery of any due tax, penalty, or interest from the petitioner in accordance with the law.

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